Government
Data disclosure may hurt drug industry sales FDA report predicts drop in U.S. pharmaceutical firms' worldwide sales if data on efficacy are revealed under proposed revisions of law For decades pharmaceutical makers have jealously guarded as trade secrets the safety and efficacy data that they must accumulate to win federal approval to market a new drug. A big reason for this stand is that they believe the data could be useful to competitors. And now that a proposed revision of the U.S. food and drug laws threatens to make these data public, drug makers are naturally horrified. Industry misgivings doubtless were not allayed late last month with the disclosure of an internal Food & Drug Administration report predicting that as much as 11%, or $1.3 billion, of the U.S. pharmaceutical industry's worldwide sales could be put in peril by full public disclosure of safety and efficacy data. The impact would be largely the result of competition from generic versions of proprietary drugs and would take place over a period of years. The report cautions, however, that "it is unreasonable to assume that all of these sales will be lost." Actually, the FDA report suggests that industry losses due to data disclosure would be minimal when compared with the overall worldwide growth in pharmaceutical sales. The agency study predicts that the world market for prescription drugs will double by 1990 to roughly $100 billion. Moreover, the report notes that although about $525 million in domestic new drug sales could be jeopardized by generic competition, the actual loss to large research-oriented firms caused by smaller generic producers would be more like $51 million. At the same time, FDA believes that drug firms are "presumably alert to molecular modification" by competitors and thus would patent whole series of new chemical entities to prevent other firms from entering the market with a closely related product. Many firms do, in fact, already throw up a barrage of patents to protect a single compound from competitors. The FDA report comes at a time when the Carter Administration's proposed omnibus drug law revision is grinding through Congressional legislative machinery. It is sure to be thrown up to
Congressional committees as evidence that industry fears are not unfounded. FDA, on the other hand, likely will use the report to downplay claims by drug company representatives that disclosure of safety and efficacy data will do irreparable harm to the industry. Apart from the effect on sales, the agency report pegs a $56 million decrease, or about 4.7%, in U.S. pharmaceutical R&D spending directly related to release of safety and efficacy data. "The impact on R&D investment is a direct consequence of increased competition in the industry and the accompanying shifts in sales from innovators to other U.S. firms and to foreign firms,', the agency report concludes. Moreover, the 34-page report suggests that since about 79% of pharmaceutical industry R&D spending goes into new drug research, a trend toward greater disclosure could produce a loss of up to $44 million of investment in pharmaceutical innovation. One of the central issues in the debate over forcing drug firms to publish data that they now keep secret is that the information could prove useful to competitors attempting to develop competing products. The agency study tends to downplay this factor. "Access to safety and efficacy data does not guarantee success in developing a competitive product, nor does lack of access [to such data] necessarily restrict competition," according to the report. Nevertheless, the report observes that "therapeutic equivalents threaten new drug sales of research-intensive firms in that their introduction into the drug market can cause erosion of the market share of an earlier entry." Congressional boosters of the Administration bill, such as Sen. Edward M. Kennedy (D.-Mass.), contend that release of safety and efficacy data will have only a minimal impact on domestic drug development, because international patent agreements will protect a drug originator's right to the product. Yet the FDA report undercuts this argument. FDA notes that protection is not nearly as strong worldwide as it is in the U.S. Although many countries offer some type of patent protection to pharmaceutical products, there are some glaring exceptions. For example, although the patent laws in Zaire offer roughly the same degree of patent protection as those in the U.S. (protection of the product, manufacturing process, and the use of the drug), it's unlikely that the developing central African nation is going to be a major drug R&D center anytime soon.
Six of 20 biggest national drug markets offer no patent protect
S c o p e off protection
N u m b e r off countries In top 2 0 markets
None Use only Process only Product only Process and use Product and use Product and process Product, process, and use
Total number off countrl·
6 1 6 1 0 0 3 3
36 2 52 1 1 0 64 16
Source: Food & Drug Administration
On the other hand, the FDA report points out that a number of highly industrialized nations such as Italy, Japan, Sweden, and Switzerland offer no patent protection for pharmaceuticals at all. Some other countries such as Canada, Denmark, West Germany, the Netherlands, Norway, and Spain offer little in the way of patent protection for drugs. Because of the patent situation and modest requirements for safety and efficacy data, these countries, as well as some others, could become major centers for firms wishing to capitalize on the disclosure of U.S. drug data. Significantly, six of the countries that offer no patent protection for drugs are in the top 20 world pharmaceutical markets. The gloomy picture of what would happen if full disclosure of safety and efficacy data were the rule is mitigated somewhat by provisions of the Administration's bill (S. 2755 and its companion H.R. 11611). Moreover, Congressional sponsors of the Administration bill appear willing to compromise on data disclosure to allow detailed summaries of safety and efficacy data to be made public instead of the raw data. The Pharmaceutical Manufacturers Association, the industry's Washington lobbying group, has publicly conceded that it would go along with the compromise, although it is apparent that the industry group would prefer no data disclosure at all. In addition, the legislative proposals contain provisions for a drug monograph system that would establish a descriptive standard for newly approved drugs. The monograph would contain safety and efficacy data. But in return for divulging the information, the originator of the data would receive five years of exclusive use of the data. D May 15, 1978C&EN
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